Sustainable Finance Disclosure Regulation (SFDR)
The Sustainable Finance Disclosure Regulation (SFDR) aims to improve the clarity and comparability of sustainability disclosures
This includes transparency on how they integrate sustainability risks in their decision making but also disclosing their investments’ adverse impacts on the environment and society.
The SFDR framework is currently undergoing a review, which is an opportunity to make it more effective for channelling investments for the just transition to a sustainable economy.
SFDR is a fundamental pillar of the EU Sustainable Finance agenda. It was first introduced by the European Commission as a core part of its 2018 Sustainable Finance Action Plan alongside the EU Taxonomy and the Climate Benchmarks Regulation.
The SFDR was created to improve transparency on sustainability in financial markets, reduce greenwashing and support capital allocation towards a sustainable economy. Its ongoing review seeks to make the framework clearer, more robust and more useful for investors and their clients.
To achieve this, SFDR sets disclosure requirements both at the level of financial institutions and at the level of financial products. This includes disclosing how sustainability risks may impact the returns of financial products, and tailored transparency rules depending on whether the product has a sustainable investment objective, integrates Environmental or Social characteristics, or has no such features.
The SFDR provisions, which were complemented at the technical level via a delegated act adopted by the European Commission, fully apply since 1 January 2023.
Why the SFDR is being reviewed
The SFDR has improved transparency on sustainability considerations in investments, but it has not fully delivered on its objectives. However, market participants have used the framework as a product classification system, despite its design as a disclosure regime. Insufficient clarity around concepts and definitions also contributed to diverging interpretations, market fragmentation and greenwashing concerns.
The review is therefore intended to create a clearer and more credible framework for sustainability-related financial products, while keeping information decision-useful for end investors and supervisors.
On 20 November 2025, the European Commission published its proposal to review the SFDR. The proposal introduces a formal product categorisation system based on minimum criteria, and significantly simplifies parts of the existing disclosure framework – notably removing entity-level disclosures.
EU institutions are currently amending the European Commission proposals. An agreement on a final text is expected for Q4 2026 / Q1 2027.
- The Council of the EU adopted its negotiating mandate on the SFDR review 24 June 2026. It broadly preserves the Commission architecture, but introduces flexibilities, including on professional-investor products, exclusions and sovereign bonds.
- In the European Parliament, the rapporteur Gerben-Jan Gerbrandy (NL, Renew) published a draft report in May 2026 and MEPs tabled more than 600 amendments. Discussions are still ongoing before the vote on the institution’s final report, focusing on scope, thresholds, exclusions, PAI indicators, entity-level disclosures and implementation timing.
Eurosif’s perspective
Eurosif broadly welcomes the move towards clearer product categories, minimum criteria, an impact layer and greater discipline around sustainability-related claims. However, the review still needs adjustments to ensure the framework is sufficiently credible and useful.
